Strategic Management:
Concepts and Cases
Part II: Strategic Actions: Strategy Formulation
Chapter 8: Global Strategy
1
The Strategic Management Process
2
Chapter 8: Global Strategy
 Overview: Seven content areas
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Traditional vs. emerging motives
Four major benefits of Global Strategy
Four factors as basis for international business
strategy
Three international corporate-level strategies
Environmental trends affecting IS
Five alternative modes for entering international
markets
2 major risks of international diversification
3
Shanghai Automotive Industry Corp (SAIC):
Reaching for Global Markets
 One of China’s oldest automotive companies and
among top three auto companies in China
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Goal: Become one of the world’s top 10 auto companies
Of note, as all major auto co.s compete in US market
 Produces autos, tractors, motorcycles, trucks and is
also involved with car leasing and financing
 Successful joint ventures (JV) （合资公司）with GM
and VW
 Owns 51% of Korean automaker SsangYong(双龙),
 SAIC learned much from partnerships and with
licensed technology launched own branded vehicles
4
Brands of SAIC
5
Introduction
 Many firms choose direct investment in assets over
indirect investment

Provides better protection for assets
6
Opportunities and Outcomes of
International Strategy
7
Chapter 8: Global Strategy
 Overview: Seven content areas







Traditional vs. emerging motives
Four major benefits of Global Strategy
Four factors as basis for international business
strategy
Three international corporate-level strategies
Environmental trends affecting IS
Five alternative modes for entering international
markets
2 major risks of international diversification
8
Identifying International Opportunities:
Incentives to Use an International Strategy (IS)
 International Strategy (IS): firm sells its goods or
services outside the domestic market
 Reasons for an IS
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International markets yield potential new opportunities
Extend product’s life cycle: innovation occurs in homecountry market, especially in an advanced economy,
and demand for product develops in other countries, so
exports provided by domestic organization
Multinational strategy: Secure（获得） need resources
Borderless demand for globally branded products.
9
Identifying International Opportunities: Incentives
to Use an International Strategy (IS) (Cont’d)
 Three Basic Benefits
 1. Increased market size
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Domestic market may lack the size to support efficient scale
manufacturing facilities
2. Economies of Scale and Learning
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Expanding size or scope of markets helps to achieve
economies of scale in manufacturing as well as marketing,
R&D, or distribution
Costs are spread over a larger sales base
Profit per unit is increased
10
Question
What kind of risks should be
considered when sharing resources
with other corporations?
11
Identifying International Opportunities: Incentives
to Use an International Strategy (IS)
(Cont’d)
 Four primary reasons (Cont’d)
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3. Location advantages: Low cost markets may…

… aid in developing competitive advantage
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… achieve better access to critical resources:
 i.e., raw materials, lower cost labor, key customers,
energy
12
Chapter 8: Global Strategy
 Overview: Seven content areas







Traditional vs. emerging motives
Four major benefits of Global Strategy
Four factors as basis for international business
strategy
Three international corporate-level strategies
Environmental trends affecting IS
Five alternative modes for entering international
markets
2 major risks of international diversification
13
International Strategies (IS)
 Firms choose one or both of two basic type of IS:
Business level and/or corporate level
 International business-level strategy
 Follows generic strategies（基本战略） of costleadership, differentiation, focused or broad
 International corporate-level strategy (N=3)
 Home country usually most important source of
competitive advantage
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Resources and capabilities frequently allow firm to
pursue markets in other countries
The determinants（决定因素） of national advantage
includes 4 factors
14
Determinants of National Advantage
P208
15
International Corporate-Level Strategies
16
International Strategies (IS)
(Cont’d)
 International corporate-level strategies (N=3)
 1. Multidomestic（多国化战略）
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Decentralized strategic & operating decisions by strategic
business-unit (SBU) in each country allows units to tailor
products to local markets
Focuses on variations（变化） of competition within each
country
Customized（面向客户的） products to meet local
customers’ specific needs and preferences
Takes steps to isolate the firm from global competitive forces
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(Cont’d)
Establish protected market positions
Compete in industry segments most affected by differences
among local countries
Deals with uncertainty due to differences across markets
17
Multidomestic
18
International Strategies (IS)
(Cont’d)
 2. Global

Firm offers standardized products across country
markets, with the competitive strategy being dictated by
the home office

Emphasizes economies of scale
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Facilitated by improved global reporting standards（报告
标准） (i.e., accounting and financial)

Strategic & operating decisions centralized at home
office （总部）（how to control?)
19
International Strategies (IS)
(Cont’d)
 2. Global (Cont’d)

Involves interdependent SBUs （Stragetic Business Unit）
operating in each country
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Home office attempts to achieve integration across
SBUs, adding management complexity
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Produces lower risk
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Is less responsive to local market opportunities
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Offers less effective learning processes (pressure to
conform (一致) and standardize)
20
Global
21
Discussion
what will happen if
coca-cola supply
customized products？
22
International Strategies (IS)
(Cont’d)
 3. Transnational
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Firm seeks to achieve both global efficiency and
local responsiveness(反应) – these are competing
goals!
Requires both global coordination and local
flexibility with this strategy/structure combination
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Flexible Coordination: Building a shared vision and
individual commitment through an integrated network
Challenging, but becoming increasingly necessary
to compete in international markets
23
International Strategies (IS)
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(Cont’d)
Growing number of global competitors hSevenens
need to keep costs down while greater information
flow and desire for specialized products pressures
firms to differentiate and even customize products
– nonetheless, Increasingly used as a strategy
24
commodities
Tea
Pies
Cakes
Coffee
Starbucks
25
Products for Chinese
26
Chapter 8: Global Strategy
 Overview: Seven content areas







Traditional vs. emerging motives
Four major benefits of Global Strategy
Four factors as basis for international business
strategy
Three international corporate-level strategies
Environmental trends affecting IS
Five alternative modes for entering international
markets
2 major risks of international diversification
27
Environmental Trends
 Two new trends
 1. Liability of foreignness（外来者的劣势）
 Global strategies not as prevalent（普遍） today, still difficult
to implement even with Internet-based strategies
 Difference of culture, management, region, economic
 2. Regionalization（区域化）
 Focus to a particular region of the world
 Increases understanding of market
 Trade agreements (I.e., EU, NAFTA) promote flow of trade
across country boundaries with their respective regions
28
Chapter 8: Global Strategy
 Overview: Seven content areas







Traditional vs. emerging motives
Four major benefits of Global Strategy
Four factors as basis for international business
strategy
Three international corporate-level strategies
Environmental trends affecting IS
Five alternative modes for entering international
markets
2 major risks of international diversification
29
International Entry Modes (N = 5)
 Follows the selection of an IS
 Five main entry modes
 1. Exporting（出口）
 2. Licensing（特许经营）
 3. Strategic Alliances（战略联盟）
 4. Acquisitions
 5. New Wholly-Owned Subsidiary（新建全资子公
司）
30
International Entry Modes (N = 5)
(Cont’d)
 1. Exporting

Involves low expense to establish operations in host
country
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Often involves contractual agreements
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Involves high transportation costs
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May have some tariffs imposed
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Offers low control over marketing and distribution
31
International Entry Modes (N = 5)
(Cont’d)
 2. Licensing
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Involves low cost to expand internationally
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Allows licensee to absorb（承担） risks
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Has low control over manufacturing and marketing
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Offers lower potential returns (shared with licensee)
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Involves risk of licensee imitating technology and product for
own use
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May have inflexible ownership arrangement
32
International Entry Modes (N = 5)
(Cont’d)
 3. Strategic Alliances
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Involve shared risks and resources
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Facilitate development of core competencies
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Involve fewer resources and costs required for entry
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May involve possible incompatibility（矛盾）, conflict
（冲突）, or lack of trust with partner

Are difficult to manage
33
International Entry Modes (N = 5)
(Cont’d)
 4. Acquisitions
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Allow for quick access to market
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Involve possible integration difficulties
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Are costly

Have complex negotiations and transaction
requirements
34
International Entry Modes (N = 5)
(Cont’d)
 5. New Wholly-Owned Subsidiary

Is costly

Involves complex processes
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Allows for maximum control
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Has the highest potential returns
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Carries high risk

Greenfield venture: Establish entirely new subsidiary
35
Question
What kind of mode is the best
way for you to enter into
international markets when you
are owner of a small firm
manufacturing electronic
products? Why?
36
International Entry Modes (N = 5)
(Cont’d)
 Dynamics of Mode of Entry: Use the best suited to
the situation at hand; affected by several factors
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Export, licensing and strategic alliance: good tactics
（战术）for early market development
Strategic alliance: used in more uncertain situations
Wholly-owned subsidiary may be preferred if
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Intellectual Property（知识产权） rights in emerging
economy not well protected
Number of firms in industry is growing fast
Need for global integration is high
Acquisitions or greenfield ventures: secure a
stronger presence in international markets
37
Chapter 8: Global Strategy
 Overview: Seven content areas







Traditional vs. emerging motives
Four major benefits of Global Strategy
Four factors as basis for international business
strategy
Three international corporate-level strategies
Environmental trends affecting IS
Five alternative modes for entering international
markets
2 major risks of international diversification
38
Risks in International Environment
 2 major risks
 1. Political
 2. Economic
 Limits to international expansions: management
problems
39
Risk in the International Environment
P222
40
Task1
1、Topic for next time:
What are the advantages of
international strategy?
2、 Read the book P207-212
strategic competitive outcomes
41
Task 2
1、Topic for next time:
P229 3/4/6
2、 Read the book P239-243
42